Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
MRF: Tired performance - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 24, 2001

    MRF: Tired performance

    The performance of MRF Limited, the market leader in the Indian tyre segment, reflects the downturn in the auto industry. Both sales and profits have nose-dived in light of slowdown in the economy. It must be noted that MRF is a September year ending company.

    (Rs m) FY00 FY01 Change
    Sales 19,038 17,140 -10.0%
    Other Income 55 40 -26.4%
    Expenditure 16,408 15,192 -7.4%
    Operating Profit (EBDIT) 2,630 1,948 -25.9%
    Operating Profit Margin (%) 13.8% 11.4%  
    Interest 643 557 -13.4%
    Depreciation 1,078 944 -12.5%
    Profit before Tax 964 487 -49.4%
    Tax 323 170 -47.4%
    Profit after Tax/(Loss) 641 317 -50.5%
    Net profit margin (%) 3.4% 1.9%  
    No. of Shares (m) 4.2 4.2  
    Diluted Earnings per share* 152.5 75.6  
    P/E Ratio   8.7  

    MRF is India’s largest tyre manufacturer with a market share of 22%. The company derives over 95% of its revenues from its tyre business, the rest coming from its presence in toys and paints. It is a key player in the Original Equipment Manufacturer (OEM) segment.

    Auto industry in FY01
    (% change) Production Sales
    Cars -12.6% -7.5%
    Multi Utility Vehicle 1.3% 2.8%
    LCV's 4.3% 4.5%
    M & HCV's -21.5% -21.3%
    TOTAL (4 wheelers) -10.6% -7.0%
    TOTAL VEHICLES -2.3% -1.9%

    MRF's sales fell by 10% to Rs 17,140 m for FY01. While overall four wheeler sales registered a decline of 7% in sales, this was primarily led by a sharp fall in passenger cars and heavy commercial vehicles segment, that account for a bulk of the industry volume. MRF being a key supplier to most of the auto majors was affected by the slowdown.

    Also, prices of one of the key raw materials used in manufacture of tyres, carbon black, went up sharply in FY01 due to higher crude prices. Carbon black manufacturers, both in India and globally, raised prices to pass on the increase in costs to the customers. To put things in perspective, Indian Rayon, one of the market leaders in the Indian carbon black industry raised prices by 19% to Rs 27,000 per tonne (US$ 563 per tonne) in FY01. This along with other factors like lower CV demand, competition in the retail segment (domestic as well as imports) has exercised a downward pressure on margins. As a result, operating profit fell by 26% in FY01. The fall in net profits would have been sharper if not for lower interest and depreciation costs.

    The prospects for the current year are also challenging. Competition has intensified in the tyre industry with the entry of multinationals like Bridgestone and Michelin. Multinational auto companies, who have presence in India, increasingly prefer these companies on account of their global relationships. There has also been undercutting of prices in recent years in an attempt to boost volume growth. Apollo, for example, had reduced radial tyre prices by almost 25% last year. MRF also has to contend with threats of cheaper imports, which are only going to be cheaper in the coming years. Though passenger car sales have shown signs of improvement in recent months, given the slowdown in the economy, one has to see if volume growth sustains for the rest of the year. However, being a market leader in the tyre segment coupled with its brand equity, MRF is expected to report a improved performance for FY02. MRF currently trades at Rs 659 implying a P/E multiple of 8.7x FY01 earnings.



    Equitymaster requests your view! Post a comment on "MRF: Tired performance". Click here!


    More Views on News

    Atul Auto: Demonetization Impacts Volumes and Profitability (Quarterly Results Update - Detailed)

    Mar 1, 2017

    Atul Auto has reported a 11.2% YoY decline in the topline while the bottomline has declined by 23% YoY.

    Endurance Technologies Ltd (IPO)

    Oct 4, 2016

    Equitymaster analyses Initial Public Offering (IPO) of Endurance Technologies Limited

    GNA Axles Limited (IPO)

    Sep 14, 2016

    Should you subscribe to GNA Axle IPO?

    Precision Camshafts (IPO)

    Jan 27, 2016

    Precision Camshafts Ltd (PCL) is one of the world's leading manufacturer and supplier of camshafts, a critical engine component, in the passenger vehicle segment.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in MRF LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts